Entering the final stretch

The NDTV takeover battle is reaching its climax and there are many likely scenarios at play

By the time you read this, the endgame in the Adani-NDTV takeover saga may not be entirely over, but there will be enough pointers towards a swift closure.
 

The securities trading ban imposed by the market regulator, Securities and Exchange Board of India (Sebi), on Prannoy and Radhika Roy ended on November 26. It would inevitably prompt Adani Group, the current owners of Vishvapradhan Commercial Private Ltd or VCPL, to submit its request — for a second time — to RRPR, the holding company of the Roys, to convert the warrants into RRPR shares, amounting to a 29.18 per cent stake in NDTV.
 

The first time the Adanis made this request on August 23, the Roys had returned the money citing a set of constraints that prevented them from going ahead with the warrant conversion. So in effect, if the Adanis hoped for a swift transfer of control, that didn’t happen. Yet they still decided to go ahead and file the open offer with Sebi for an additional 26 per cent stake in NDTV.
 

It was interesting to see how Sebi would deal with this piquant situation. In the normal course, the takeover would have been triggered after Adani acquired 26 per cent in NDTV or agreed to do so. That didn’t happen. In addition, since the Roys had maintained that their consent, under the terms of the 2009 loan agreement, was not sought in writing, technically, the second condition also remained unfulfilled.
 

The status reports on the open offer on the Sebi website show there were a set of letters exchanged between the market regulator and JM Financial, the merchant banker to the issue, but the specifics are not available in the public domain. The chances are that Sebi may have relied on the 2009 loan agreement to clear the open offer. After all, Sebi’s stated position has all along been that given the structure of that loan, it triggered an open offer back then.
 

On November 11, Sebi cleared the formal letter of offer, which in turn also confirms that the Adanis’ warrant conversion is yet to be consummated. The moot point is whether the market regulator ought to have waited till the warrant conversion was completed, after the trading ban on the Roys was lifted on November 26. Clearly, they did not feel the need to wait and allowed the tendering process under the open offer to start on November 22. More on this later.
 

It is useful to bear in mind that the Roys now don’t have any legal reasons for not going ahead with the warrant conversion. In the first week since the Adanis announced their momentous decision to buy out the Reliance-Nahata stake in VCPL, the Roys had raised a few issues that they said prevented them from carrying out the transfer. One, in 2019, Sebi had placed a securities trading ban on the Roys for not fully disclosing the 2009 loan agreement with the Ambanis. The Roys had then argued that the ban prevented them from carrying out the warrant conversion. Now that argument is no longer tenable. Also, the Adanis had swiftly produced a letter from the Income Tax department clarifying that the department had no objection to the warrant conversion, yet another issue that the Roys had brought out.
 

Once the warrant conversion happens ( it is likely this week), the endgame will have truly begun. In the meantime, the tendering process is equally intriguing. The open offer price of Rs 294 is well below the current market price of around Rs 406. Therefore, there is no incentive for public shareholders to tender in their shares at that price. Yet a little more than 53 lakh shares, amounting to around 31.78 per cent out of a maximum offer quantity of 1.67 crore shares have been tendered. Who are these investors and why did they tender their shares? There is no way to know the identity of these shareholders, till the tendering process ends on December 5.
 

 Before the warrant conversion, the Roys could have played one last card: Invoke the Ministry of Information and Broadcasting (MIB) guidelines on the licence on uplinking and downlinking. According to clause 3.1.2 of the MIB guidelines, permission would be granted to a broadcaster only in cases where the equity held by the largest Indian shareholder is at least 51 per cent of the total equity. The Roys could have argued that the warrant conversion would reduce their stake in NDTV from 61 per cent to 32 per cent, and make them non-compliant with the MIB guidelines. If that was their last bargaining chip, specific amendments issued by the MIB on November 9 have significantly diluted the Roys’ bargaining powers. Without getting caught in the weeds, these amendments create an opportunity for the Adanis to claim their legitimate co-ownership of NDTV.
 

So what’s next? Over this last weekend, the Financial Times published an interview with Gautam Adani, where he spoke about his responsibility to maintain NDTV’s editorial integrity. And more importantly, he also stated he had invited Dr Roy to stay on as chair of NDTV. How the Roys respond to this overture remains to be seen.


The writer is co-founder at Founding Fuel